Bitcoin News Today: Japan Balances Crypto Oversight and Growth with 2026 Tax Overhaul

Japan is set to overhaul its cryptocurrency tax framework in 2026, introducing a flat 20% levy on trading gains to align digital assets with stocks and investment trusts, according to multiple reports. The reform, expected to be enshrined in the 2026 tax policy outline, marks a significant shift from the current progressive tax system, which can impose rates as high as 55% on crypto profits, deterring domestic trading activity according to reports. Under the proposed structure, 15% of the 20% tax will fund the central government, while 5% will go to local authorities. Lawmakers argue the change will revive market participation, boost innovation in blockchain infrastructure, and attract institutional investors like Nomura Asset Management and Daiwa Asset Management, which are already preparing product strategies for a post-regulatory environment according to reports.

The Financial Services Agency (FSA) is also reclassifying cryptocurrencies as financial instruments under the Financial Instruments and Exchange Act, a move that will subject them to insider trading regulations and expand investor protections according to FSA analysis. This reclassification, part of a broader 2026 regulatory package, aims to address past vulnerabilities highlighted by major exchange collapses, such as the 2014 Mt. Gox incident and the 2024 DMM Bitcoin hack. To further stabilize the market, the FSA plans to mandate liability reserves for licensed exchanges, calculated based on trading volume and incident history, with insurance policies potentially offsetting cash requirements according to regulatory analysis.

The tax reform is expected to have immediate economic ripple effects. Japan's crypto market, which reported $9.6 billion in spot trading volume in September 2025, could see renewed activity as investors respond to the lower tax burden. With approximately eight million active crypto accounts in the country, the shift may also stimulate demand for regulated investment products. Asset managers are already structuring Bitcoin and Ethereum ETFs and multi-asset crypto trusts ahead of the rule change. These firms face challenges in establishing pricing benchmarks, securing rapid asset acquisition, and implementing robust custody systems according to industry analysis amid crypto's inherent volatility.

Critics of the current system argue that the progressive tax rates distort trading behavior, as investors delay sales to avoid steep liabilities. By aligning crypto with equities, Japan joins a global trend of legitimizing digital assets as mainstream investments. The reform also reflects a strategic pivot by the government to position itself as a hub for blockchain innovation, with officials citing potential long-term gains from increased trading activity and tax revenue according to policy documents.

As the 2026 deadline approaches, the FSA's draft measures will cover 105 cryptocurrencies, including Bitcoin and Ethereum, while policymakers continue refining enforcement mechanisms for liability reserves and custody rules according to regulatory analysis. The overhaul underscores Japan's dual approach of tightening oversight and fostering growth, balancing investor protections with incentives for market participation.